Just as the 1929 stock market crash revealed the need for standardized profit reporting (GAAP), today's social and environmental crises necessitate standardized impact reporting. This creates the transparency required for investors, consumers, and employees to make informed decisions and for markets to function efficiently.
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To counter political backlash against ESG, Mars' CEO reframes sustainability as a fundamental business imperative. For a food company reliant on agriculture, climate change directly threatens crop viability and affordability. This makes environmental action a matter of operational resilience and risk management, completely separate from political debate.
Citing a Harvard Business School study of 1,800 companies, Sir Ronald Cohen reveals the staggering scale of negative externalities. A third of these firms (600) cause environmental damage equivalent to a quarter or more of their profits, while 250 create more damage than they make in profit, highlighting the financial materiality of impact.
Standard metrics like the Air Quality Index (AQI) are abstract and fail to motivate change. Economist Michael Greenstone created the Air Quality Life Index (AQLI), which translates pollution into a tangible, personal metric—years of life expectancy lost—making the data hard to ignore and spurring action.
To operationalize its commitment to sustainability, Mars initially moved responsibility for the function into its Finance department. This organizational design choice ensured that sustainability investments and progress were reviewed with the same scrutiny and integrated into the same planning cycles as the company's core financial P&L.
The current movement towards impact-focused business is not just a trend but a fundamental economic succession. Just as the tech revolution reshaped global industries, the impact revolution is now establishing a new paradigm where companies are valued on their ability to create both profit and positive contributions to society and the planet.
The debate over AI chip depreciation highlights a flaw in traditional accounting. GAAP was designed for physical assets with predictable lifecycles, not for digital infrastructure like GPUs whose value creation is dynamic. This mismatch leads to accusations of financial manipulation where firms are simply following outdated rules.
Impact data isn't just a niche metric for investors. Sir Ronald Cohen reframes it as a basic human right. He argues that every employee, consumer, and investor has a right to transparent, standardized information about the good and harm a company creates, moving the conversation from finance to ethics.
Quantifying the "goodness" of an AI-generated summary is analogous to measuring the impact of a peacebuilding initiative. Both require moving beyond simple quantitative data (clicks, meetings held) to define and measure complex, ineffable outcomes by focusing on the qualitative "so what."
To ensure accountability for societal impact, Mars directly links 40% of its CEO's compensation to non-financial metrics, including sustainability goals. This structure challenges the conventional, finance-only incentive models prevalent in public companies and hardwires long-term purpose into executive performance.
The emergence of venture capital as a major asset class was unlocked by the new ability to mathematically measure and price risk. Similarly, the current impact investing movement is being driven by our newfound technological capacity (via big data and computing) to quantify a company's social and environmental effects.